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HomeMy WebLinkAbout[04e] TIF 2-3 Assignment Council Agenda Item 4e MEETING DATE: April 16, 2018 AGENDA ITEM: TIF 2-3 Assignment of Development Agreement SUBMITTED BY: Administration BOARD/COMMISSION/COMMITTEE RECOMMENDATION: PREVIOUS COUNCIL ACTION: In 2014 the EDA and City Council approved the utilization of TIF for the project entitled Bayou Alley Flats. The project was delayed and the supporting documents for the TIF were amended in October 2017. The Council was requested in December 2017 to amend the TIF Agreement to change the assignment of the TIF to a different financial institution. BACKGROUND INFORMATION: While the City has approved the reassignment of the TIF Note, the Development Agreement was not assigned as part of that approval. The document before the Council at this time is approving the assignment of the Development Agreement and has been approved by the City Bond Counsel Attorney. ATTACHMENTS: Red-lined Assignment Clean Copy Assignment REQUESTED COUNCIL ACTION: Authorize the Mayor and Administrator to execute the Assignment of Development Agreement and Tax Increment Financing Note for TIF 2-3 Bayou Alley Flats. (Space above reserved for recorder’s use.) ASSIGNMENT OF DEVELOPMENT AGREEMENT AND TAX INCREMENT FINANCING NOTE This Assignment of Development Agreement and Tax Increment Financing Note (this “Assignment”) is made and entered into as of March 5, 2018, by and among BAYOU ALLEY FLATS, LLC, a Minnesota limited liability company (“Flats”), JON PETTERS, a married individual and a Minnesota resident (“Petters” and with Flats, each a “Borrower” and collectively the “Borrowers”) in favor of KENSINGTON BANK, a Minnesota banking association (“Lender”). Capitalized terms used herein without specific definition shall have the meanings given to them in the Development Agreement (as hereinafter defined). A.Borrowers are developing a retail and residential rental housing project located at 24 North College Ave., St. Joseph, Minnesota (the “Project”) as legally described on Addendum A. B.To assist Borrowers in financing the project, Flats and Lender have entered into a certain Construction and Term Loan Agreement dated as of the date hereof (collectively, as amended and with all attachments, the “Loan Agreement”), pursuant to which Lender has agreed to advance certain funds to Flats. Lender and Petters have also entered into a note agreement (“Mortgage Note”) whereby Lender has agreed to provide certain financing to Petters in connection with the Project. C.To further assist Flats in financing the Project, Flats and the City of St. Joseph (“AuthorityCity”) have entered into an Amended and Restated Development Agreement dated as of October 24, 2017 (as amended, the “Development Agreement”), a copy of which is attached hereto as Addendum B. Pursuant to the Development Agreement, AuthorityCity will reimburse Flats for up to $642,000 pursuant to the terms of the Development Agreement. Pursuant to Article 3 of the Development Agreement, AuthorityCity will issue its Taxable Tax Increment Revenue Note (the “TIF Note”) in the principal amount of $642,000 to Flats, as the holder thereof, to reimburse Borrower for a portion of the costs from tax increment revenues generated from the Project upon compliance with the conditions set forth in the Development Agreement. D.Flats subsequently assigned certain revenues under the TIF Note to Petters pursuant to that certain Assignment of Tax Increment Revenue Note dated December 18, 2017. On that date, Petters had assigned the revenues under the TIF Note to Lender. Since this Assignment covers the revenues under the TIF Note and is required for Lender to advance funds under the Loan Agreement and Mortgage Note, such assignment from Petters to Lender on December 18, 2017, is terminated. 137887299.6137887299.7 E.To secure payment of all indebtedness under the Loan Agreement and the Mortgage Note, each Borrower has agreed to grant as security any and all rights and interests of each may have under the Development Agreement and TIF Note. F.Lender has required, as a condition to advancing any funds, that Borrowers execute and deliver this Assignment to Lender and that AuthorityCity acknowledge and consent to this Assignment. NOW, THEREFORE, in consideration of the foregoing and in order to induce Lender to enter into the Loan Agreement and Mortgage Note and advance any funds thereunder, Borrowers agree as follows: 1.Assignment. Each Borrower hereby transfers and assigns to Lender and grants to Lender a security interest in all of its right, title and interest in and to the Development Agreement, the TIF Note and any and all tax increment revenues, but excluding any and all obligations thereunder. This Assignment shall constitute a perfected, absolute and present assignment. In furtherance of such transfer and assignment, on the date of execution of the TIF Note, Borrowers shall deliver to Lender the original executed TIF Note together with an endorsement of the TIF Note in the form attached hereto as Addendum C. 2.Representations and Warranties. Each Borrower, jointly and severally, represents and warrants to Lender and agrees as follows: (a)Borrower will not, without the prior written consent of Lender, modify, amend, supplement, terminate, surrender or change in any manner whatsoever the Development Agreement or the TIF Note and will not release or discharge the obligations of any party thereto or modify or extend the time of performance thereunder or the scope of the work thereunder. (b)The Development Agreement and the TIF Note and rights to any tax increment revenues thereunder are free and clear of all liens, security interests, assignments and encumbrances other than the assignment and security interest created by this Assignment (the “Permitted Lien”). (c)Borrowers collectively have the full right, power and authority to assign the Development Agreement, the TIF Note and any and all tax increment revenues thereunder free and clear of any and all liens, security interests and assignments, except the Permitted Lien. (d)Borrower will keep the Development Agreement, the TIF Note and the tax increment revenues free from any lien, encumbrance, assignment or security interest whatsoever, other than this Assignment and security interest and the Permitted Lien. (e)Borrower will from time to time and at the request of Lender execute such documents and pay the cost of filing and recording the same and do such other acts and things as Lender may request to establish and maintain a first priority perfected security interest in the Development Agreement, the TIF Note and the tax increment revenues which is valid and superior to all liens, claims or security interests whatsoever. (f)There have been no defaults on the part of AuthorityCity or Borrower under the Development Agreement. 3.Covenants of Borrower. Each Borrower covenants and agrees that: 2 137887299.6137887299.7 (a)It shall perform each and every one of its duties and obligations under the Development Agreement and observe and comply with each and every term, covenant, condition, agreement, requirement, restriction and provision of the Development Agreement. (b)It shall give prompt notice to Lender of any claim of or notice of default under the Development Agreement known or given to it together with a copy of any such notice or claim if in writing. (c)At the sole cost and expense of Borrower, each Borrower will enforce the full and complete performance of each and every duty and obligation to be performed by AuthorityCity or any other party under the Development Agreement and the TIF Note. (d)It will appear in and defend any action arising out of or in any manner connected with the Development Agreement and the duties and obligations of Borrower or AuthorityCity thereunder. 4.Purpose of Assignment. This Assignment is made to induce Lender to issue the Loan Agreement and Mortgage Note and for the purpose of securing the performance and observance by each Borrower of all of the terms and conditions of the Loan Agreement and Mortgage Note and all documents delivered under or in connection with such agreements, all other obligations of a Borrower to Lender in connection with the Project, and all obligations of a Borrower under any other agreement with Lender. 5.Lender’s Rights to Act on Behalf of Borrower; Payments under TIF Note. Each Borrower hereby authorizes Lender during an Event of Default to act on its behalf either in the name of either Borrower or Lender in connection with the exercise of any of the rights of a Borrower under the Development Agreement. Each Borrower hereby irrevocably constitutes and appoints Lender as its attorney-in-fact to demand, receive and enforce each Borrower’s rights with respect to the Development Agreement and the TIF Note after an Event of Default. Each Borrower agrees to reimburse, jointly and severally, Lender on demand for any expenses incurred in good faith by Lender, or its agents or attorneys, pursuant to the aforesaid authorization. Each Borrower hereby irrevocably instructs, directs, authorizes and empowers all parties to the Development Agreement to recognize the claims of Lender, or its successors or assigns hereunder, and to act upon any instructions or directions of Lender without investigating the reason for any action taken by Lender. All payments due under the TIF Note, whether before, during, or after an Event of Default, shall be made directly to Lender. 6.No Assumption by Lender. It is understood and agreed that Lender does not assume any of the obligations or duties imposed upon any Borrower under the Development Agreement and Lender does not accept any responsibility or liability for the performance of any of the obligations imposed upon any Borrower pursuant to the Development Agreement. 7.Scope of Assignment. The rights assigned by this Assignment include but are not limited to all of Borrower’s interest in the Development Agreement, the TIF Note and any and all tax increment revenues, including all right, power, privilege and option to modify or amend the Development Agreement or the TIF Note, or waive or release the performance or satisfaction of any duty or obligation under the Development Agreement or the TIF Note. 8.Event of Default. An “Event of Default” shall mean the occurrence of any Event of Default under the Development Agreement, the TIF Note, the Loan Agreement, the Mortgage Note, or any related documents or other agreement by and between Lender and a Borrower. 3 137887299.6137887299.7 9.Remedies. Upon the occurrence of an Event of Default, Lender may without demand or performance or other demand, advertisement, or notice of any kind, except such notice as may be required under the Uniform Commercial Code and all of which are, to the extent permitted by law, hereby expressly waived, exercise any right of Borrower to demand, collect, receive and receipt for, compromise, compound, settle and prosecute and discontinue any suits or proceedings in respect of any or all of the amounts payable pursuant to the Development Agreement or the TIF Note; take any action that Lender may deem necessary or desirable in order to collect the amounts payable pursuant to the Development Agreement and the TIF Note, including, without limitation, the power to perform or direct the performance by any other party to any contracts which are a part of the Development Agreement; exercise any of the remedies available to a secured party under the Uniform Commercial Code and/or to proceed to protect and enforce this Assignment by suits or proceedings or otherwise; and to enforce any other legal or equitable remedy available to Lender. The foregoing remedies are cumulative of and in addition to and are not restrictive of or in lieu of, the rights or remedies provided for or allowed in the Loan Agreement, the Mortgage Note or any other instrument given in connection with the Loan Agreement or Mortgage Note, or as provided for or allowed by law or in equity. 10.Self Help By Lender. Should a Borrower fail to perform any of its duties and obligations under the Development Agreement, then following not less than three (3) Days’ notice to the Borrower, Lender may perform the same without obligation to do so and without releasing the Borrower from its obligation to do perform such duties and obligations, and to the extent that Lender shall incur any costs or pay any monies in connection therewith, including without limitation any costs or expenses of counsel for Lender, Borrowers, jointly and severally, shall pay the same upon demand. 11.Indemnity. Lender shall have no obligation to perform or satisfy any duty or obligation of a Borrower under the Development Agreement. Each Borrower shall and does hereby, jointly and severally, indemnify, defend and hold Lender harmless from and against and in respect of any and all actions, causes of action, suits, claims, demands, judgments, proceedings and investigations (or any appeal thereof or relative thereto or other review thereof) of any kind or nature whatsoever, arising out of, by reason of, as a result of or in connection with the Development Agreement or the TIF Note, and any and all liabilities, damages, losses, costs, expenses (including fees of counsel and expenses and disbursements of counsel), amounts of judgment, assessments, fines or penalties, and amounts paid in compromise or settlement, suffered, incurred or sustained by Lender as a result of, or reason of or in connection with any of the matters above. Notwithstanding the foregoing, Borrowers shall not be required to indemnify Lender for any loss, cost or damage resulting solely from Lender’s gross negligence or willful misconduct. 12.Uniform Commercial Code. To the extent that this Assignment may be governed by the provisions of the Uniform Commercial Code now or hereafter in effect, this Assignment shall be deemed to be a security agreement within the meaning of the Uniform Commercial Code, shall be governed by the provisions thereof and shall constitute a grant to Lender of a security interest in the Development Agreement and the TIF Note. 13.Choice of Law. The parties to this Assignment have contracted for Minnesota law to govern this Assignment and it is agreed that this Assignment is made pursuant to, and shall be construed and governed by, the laws of the State of Minnesota without regard to the principles of conflicts of law. 14.Notices. Any notices and other communications permitted or required by the provisions of this Assignment (except for telephonic notices expressly permitted) shall be in writing and shall be deemed to have been properly given or served by depositing the same with the United States Postal Service, or any official successor thereto, designated as Certified Mail, Return Receipt Requested, bearing adequate postage, or deposited with a reputable private courier or overnight delivery service, and 4 137887299.6137887299.7 addressed as hereinafter provided. Each such notice shall be effective upon being deposited as aforesaid. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice sent. By giving to the other party hereto at least 10 days’ notice thereof, either party hereto shall have the right from time to time to change its address and shall have the right to specify as its address any other address within the United States of America. Each notice to Lender shall be addressed as follows: Kensington Bank 101 East 3rd Street PO Box 220 Cokato, MN 55321-0220 Attention: Jon Hall with a copy to: Stinson Leonard Street LLP 3800 Eighth Street North, Suite 102 St. Cloud, MN 56303 Attention: Alex Schoephoerster Each notice to Borrower shall be addressed as follows: Bayou Alley Flats, LLC 24 North College Ave St. Joseph, MN 56374 Attention: Jon Petters 15.Successors and Assigns; Recording. This Assignment shall bind Flats and Petters and each’s successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. At the option of Lender, this Assignment may be recorded in the land records of Stearns County, Minnesota. 16.Termination. This Agreement shall terminate upon full and final repayment of all indebtedness under the Loan Agreement and Mortgage Note. This instrument was drafted by: STINSON LEONARD STREET LLP (ARS) 3800 Eighth Street N., Suite 102 St. Cloud, MN 56303 5 137887299.6137887299.7 \[The remainder of this page has been left blank intentionally.\] 6 137887299.6137887299.7 IN WITNESS WHEREOF, the Borrowers have executed this Assignment of Development Agreement and Tax Increment Financing Note as of the date and year first written above. BAYOU ALLEY FLATS, LLC, a Minnesota limited liability company By: Name: Jon C. Petters Its: Chief Manager STATE OF MINNESOTA) ) ss COUNTY OF STEARNS) The foregoing instrument was acknowledged before me this 5th day of March, 2018, by Jon C. Petters, as Chief Manager of Bayou Alley Flats, LLC, a Minnesota limited liability company, on behalf of said limited liability company. Notary Public JON PETTERS, a married individual STATE OF MINNESOTA) ) ss COUNTY OF STEARNS) The foregoing instrument was acknowledged before me this 5th day of March, 2018, by Jon Petters, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument. Notary Public \[Signature page to Assignment of Development Agreement and Tax Increment Financing Note\] S-1 137887299.6137887299.7 ACKNOWLEDGEMENT AND CONSENT The City of St. Joseph, Minnesota (“AuthorityCity”) acknowledges and consents to the foregoing Assignment of Development Agreement and Tax Increment Financing Note (“Assignment”). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Assignment. In connection with the Assignment, AuthorityCity hereby certifies to Lender as follows: 1)AuthorityCity acknowledges that Lender, as issuer of the Loan Agreement and Mortgage Note, has required this consent as a condition of issuing the Loan Agreement and Mortgage Note and that Lender will rely on this consent in connection therewith. 2)The Development Agreement has not been amended or modified in any respect except as set forth in the Assignment. The Development Agreement is in full force and effect, and AuthorityCity has given no notice of any default thereunder. To Authority’sCity’s knowledge, Flats and Petters have performed all of its obligations under the Development Agreement which are required to be performed as of the date hereof and they arethe City is not inaware of any default in the performance or observance of any of their covenants or agreements under the Development Agreement or pursuant to any other agreement with Authority. 3)AuthorityCity agrees to give to Lender a copy of any notice of an Event of Default sent to Flats, at the same time as such notice is given to Flats under the Development Agreement, addressed as follows: Each notice to Lender shall be addressed as follows: Kensington Bank 101 East 3rd Street PO Box 220 Cokato, MN 55321-0220 Attention: Jon Hall with a copy to: Stinson Leonard Street LLP 3800 Eighth Street North, Suite 102 St. Cloud, MN 56303 Attention: Alex Schoephoerster Each notice to Flats shall be addressed as follows: Bayou Alley Flats, LLC 24 North College Ave St. Joseph, MN 56374 Attention: Jon Petters 137887299.6137887299.7 Lender shall have the right to cure any default by Flats under the Development Agreement upon the same terms as are applicable to Flats; provided, however, that Lender shall have not less than thirty (30) days following receipt of notice from AuthorityCity to cure any such default. 4)AuthorityCity acknowledges that Lender is not responsible for the performance of any of Flats obligations under the Development Agreement and the acceptance of the Assignment by Lender does not constitute or create such an assumption of liability by Lender; provided, however this Acknowledgement and Consent of AuthorityCity does not release Flats from its obligations under the Development Agreement. \[The remainder of this page has been left blank intentionally.\] 2 137887299.6137887299.7 Dated: ____________, 2018 CITY OF ST. JOSEPH, MINNESOTA By Rick Schultz, Mayor By Judy Weyrens, City Administrator STATE OF MINNESOTA) ) ss. COUNTY OF STEARNS) On this _____ day of _______________, 2018, before me personally appeared Rick Schultz, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument as the Mayor of the City of St. Joseph, Minnesota, on behalf of the AuthorityCity. Given under may hand and official seal this _____ day of ______________, 2018. Notary Public STATE OF MINNESOTA) ) ss. COUNTY OF STEARNS) On this _____ day of _______________, 2018, before me personally appeared Judy Weyrens, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument as the City Administrator of the City of St. Joseph, Minnesota, on behalf of the AuthorityCity. Given under may hand and official seal this _____ day of ______________, 2018. Notary Public \[Signature page to Acknowledgement and Consent to Assignment of Development Agreement and Tax Increment Financing Note (Kensington Bank)\] S-1 137887299.6137887299.7 ADDENDUM A Legal Description The Land described in the referenced instrument is located in Stearns County, Minnesota, and is legally described as follows: Lot 1, Block 1, Bayou Alley Flats, Stearns County, Minnesota and That part of the northerly 64.00 feet of Lots 1, 2 and 3, Block 10, TOWNSITE OF ST JOSEPH, Stearns County, Minnesota, according to the recorded plat thereof, lying westerly of the following described Line A, and lying southerly of the following described Line B. Line A Beginning at a point on the north line of said Lot 3 distant 4.93 feet westerly of the northeast corner of said Lot 3, as measured along said north line; thence southerly 64.03 feet, more or less, to the point of intersection of a line distant 64.00 feet southerly of, as measured at a right angle to and parallel with the northerly line of said Lot 3, and the east line of said Lot 3, and there terminating, Line B Commencing at the most westerly corner of said Block 10; thence South 17 degrees 09 minutes 25 seconds East, assumed bearing along the westerly line of said Block 10 for 60.00 feet to a line distant 60.00 feet southerly of, as measured at a right angle to and parallel with the north line of said Lots 1 and 2, said point also being the point of beginning; thence North 73 degrees 20 minutes 16 seconds East, along the last described parallel line and its easterly extension for 178.05 feet to the afore described Line A and there terminating. Property Address: 24 North College Ave. Saint Joseph, MN 56374 137887299.6137887299.7 ADDENDUM B COPY OF DEVELOPMENT AGREEMENT 137887299.6137887299.7 ADDENDUM C FORM OF ALLONGE ENDORSEMENT ALLONGE TO: AMENDED AND RESTATED DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF ST. JOSEPH, MINNESOTA, AND BAYOU ALLEY FLATS, LLC, DATED OCTOBER 24, 2017, AS AMENDED AND ASSIGNED, IN THE ORIGINAL PRINCIPAL AMOUNT OF $642,000 PAYABLE TO THE ORDER OF BAYOU ALLEY FLATS, LLC OR REGISTERED ASSIGNS. Pay to the order of KENSINGTON BANK, a Minnesota banking association. \[Signature Page to Follow\] 137887299.6137887299.7 BAYOU ALLEY FLATS, LLC, a Minnesota limited liability company By: Name: Its: Dated: ___________ STATE OF MINNESOTA) )ss. COUNTY OF __________) The foregoing instrument was acknowledged before me this ____ day of _____, 20__, by _________________, the ___________ of Bayou Alley Flats, LLC a Minnesota limited liability company, on behalf of the company. __________________________________ Notary Public JON PETTERS, a married individual Dated: ___________ STATE OF MINNESOTA) ) ss COUNTY OF ___________) The foregoing instrument was acknowledged before me this ____ day of _____, 20__, by Jon C. Petters, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument. Notary Public \[Signature page to Allonge Endorsement of 137887299.6137887299.7 Development Agreement and Tax Increment Financing Note (Kensington Bank)\] 137887299.6137887299.7 Summary Report: Litéra® Change-Pro TDC 7.0.0.385 Document Comparison done on 4/3/2018 1:38:19 PM Style Name: Default Style Original DMS:iw://EDMS/CORE/137887299/6 Modified DMS: iw://EDMS/CORE/137887299/7 Changes: Add27 Delete29 Move From0 Move To0 Table Insert0 Table Delete0 Table moves to0 Table moves from0 Embedded Graphics (Visio, ChemDraw, Images etc.)0 Embedded Excel0 Format Changes0 56 Total Changes: (Space above reserved for recorder’s use.) ASSIGNMENT OF DEVELOPMENT AGREEMENT AND TAX INCREMENT FINANCING NOTE This Assignment of Development Agreement and Tax Increment Financing Note (this “Assignment”) is made and entered into as of March 5, 2018, by and among BAYOU ALLEY FLATS, LLC, a Minnesota limited liability company (“Flats”), JON PETTERS, a married individual and a Minnesota resident (“Petters” and with Flats, each a “Borrower” and collectively the “Borrowers”) in favor of KENSINGTON BANK, a Minnesota banking association (“Lender”). Capitalized terms used herein without specific definition shall have the meanings given to them in the Development Agreement (as hereinafter defined). A. Borrowers are developing a retail and residential rental housing project located at 24 North College Ave., St. Joseph, Minnesota (the “Project”) as legally described on Addendum A. B. To assist Borrowers in financing the project, Flats and Lender have entered into a certain Construction and Term Loan Agreement dated as of the date hereof (collectively, as amended and with all attachments, the “Loan Agreement”), pursuant to which Lender has agreed to advance certain funds to Flats. Lender and Petters have also entered into a note agreement (“Mortgage Note”) whereby Lender has agreed to provide certain financing to Petters in connection with the Project. C. To further assist Flats in financing the Project, Flats and the City of St. Joseph (“City”) have entered into an Amended and Restated Development Agreement dated as of October 24, 2017 (as amended, the “Development Agreement”), a copy of which is attached hereto as Addendum B. Pursuant to the Development Agreement, City will reimburse Flats for up to $642,000 pursuant to the terms of the Development Agreement. Pursuant to Article 3 of the Development Agreement, City will issue its Taxable Tax Increment Revenue Note (the “TIF Note”) in the principal amount of $642,000 to Flats, as the holder thereof, to reimburse Borrower for a portion of the costs from tax increment revenues generated from the Project upon compliance with the conditions set forth in the Development Agreement. D. Flats subsequently assigned certain revenues under the TIF Note to Petters pursuant to that certain Assignment of Tax Increment Revenue Note dated December 18, 2017. On that date, Petters had assigned the revenues under the TIF Note to Lender. Since this Assignment covers the revenues under the TIF Note and is required for Lender to advance funds under the Loan Agreement and Mortgage Note, such assignment from Petters to Lender on December 18, 2017, is terminated. E. To secure payment of all indebtedness under the Loan Agreement and the Mortgage Note, each Borrower has agreed to grant as security any and all rights and interests of each may have under the Development Agreement and TIF Note. 137887299.7 F. Lender has required, as a condition to advancing any funds, that Borrowers execute and deliver this Assignment to Lender and that City acknowledge and consent to this Assignment. NOW, THEREFORE, in consideration of the foregoing and in order to induce Lender to enter into the Loan Agreement and Mortgage Note and advance any funds thereunder, Borrowers agree as follows: 1. Assignment. Each Borrower hereby transfers and assigns to Lender and grants to Lender a security interest in all of its right, title and interest in and to the Development Agreement, the TIF Note and any and all tax increment revenues, but excluding any and all obligations thereunder. This Assignment shall constitute a perfected, absolute and present assignment. In furtherance of such transfer and assignment, on the date of execution of the TIF Note, Borrowers shall deliver to Lender the original executed TIF Note together with an endorsement of the TIF Note in the form attached hereto as Addendum C. 2. Representations and Warranties. Each Borrower, jointly and severally, represents and warrants to Lender and agrees as follows: (a) Borrower will not, without the prior written consent of Lender, modify, amend, supplement, terminate, surrender or change in any manner whatsoever the Development Agreement or the TIF Note and will not release or discharge the obligations of any party thereto or modify or extend the time of performance thereunder or the scope of the work thereunder. (b) The Development Agreement and the TIF Note and rights to any tax increment revenues thereunder are free and clear of all liens, security interests, assignments and encumbrances other than the assignment and security interest created by this Assignment (the “Permitted Lien”). (c) Borrowers collectively have the full right, power and authority to assign the Development Agreement, the TIF Note and any and all tax increment revenues thereunder free and clear of any and all liens, security interests and assignments, except the Permitted Lien. (d) Borrower will keep the Development Agreement, the TIF Note and the tax increment revenues free from any lien, encumbrance, assignment or security interest whatsoever, other than this Assignment and security interest and the Permitted Lien. (e) Borrower will from time to time and at the request of Lender execute such documents and pay the cost of filing and recording the same and do such other acts and things as Lender may request to establish and maintain a first priority perfected security interest in the Development Agreement, the TIF Note and the tax increment revenues which is valid and superior to all liens, claims or security interests whatsoever. (f) There have been no defaults on the part of City or Borrower under the Development Agreement. 3. Covenants of Borrower. Each Borrower covenants and agrees that: (a) It shall perform each and every one of its duties and obligations under the Development Agreement and observe and comply with each and every term, covenant, condition, agreement, requirement, restriction and provision of the Development Agreement. 2 137887299.7 (b) It shall give prompt notice to Lender of any claim of or notice of default under the Development Agreement known or given to it together with a copy of any such notice or claim if in writing. (c) At the sole cost and expense of Borrower, each Borrower will enforce the full and complete performance of each and every duty and obligation to be performed by City or any other party under the Development Agreement and the TIF Note. (d) It will appear in and defend any action arising out of or in any manner connected with the Development Agreement and the duties and obligations of Borrower or City thereunder. 4. Purpose of Assignment. This Assignment is made to induce Lender to issue the Loan Agreement and Mortgage Note and for the purpose of securing the performance and observance by each Borrower of all of the terms and conditions of the Loan Agreement and Mortgage Note and all documents delivered under or in connection with such agreements, all other obligations of a Borrower to Lender in connection with the Project, and all obligations of a Borrower under any other agreement with Lender. 5. Lender’s Rights to Act on Behalf of Borrower; Payments under TIF Note. Each Borrower hereby authorizes Lender during an Event of Default to act on its behalf either in the name of either Borrower or Lender in connection with the exercise of any of the rights of a Borrower under the Development Agreement. Each Borrower hereby irrevocably constitutes and appoints Lender as its attorney-in-fact to demand, receive and enforce each Borrower’s rights with respect to the Development Agreement and the TIF Note after an Event of Default. Each Borrower agrees to reimburse, jointly and severally, Lender on demand for any expenses incurred in good faith by Lender, or its agents or attorneys, pursuant to the aforesaid authorization. Each Borrower hereby irrevocably instructs, directs, authorizes and empowers all parties to the Development Agreement to recognize the claims of Lender, or its successors or assigns hereunder, and to act upon any instructions or directions of Lender without investigating the reason for any action taken by Lender. All payments due under the TIF Note, whether before, during, or after an Event of Default, shall be made directly to Lender. 6. No Assumption by Lender. It is understood and agreed that Lender does not assume any of the obligations or duties imposed upon any Borrower under the Development Agreement and Lender does not accept any responsibility or liability for the performance of any of the obligations imposed upon any Borrower pursuant to the Development Agreement. 7. Scope of Assignment. The rights assigned by this Assignment include but are not limited to all of Borrower’s interest in the Development Agreement, the TIF Note and any and all tax increment revenues, including all right, power, privilege and option to modify or amend the Development Agreement or the TIF Note, or waive or release the performance or satisfaction of any duty or obligation under the Development Agreement or the TIF Note. 8. Event of Default. An “Event of Default” shall mean the occurrence of any Event of Default under the Development Agreement, the TIF Note, the Loan Agreement, the Mortgage Note, or any related documents or other agreement by and between Lender and a Borrower. 9. Remedies. Upon the occurrence of an Event of Default, Lender may without demand or performance or other demand, advertisement, or notice of any kind, except such notice as may be required under the Uniform Commercial Code and all of which are, to the extent permitted by law, hereby expressly waived, exercise any right of Borrower to demand, collect, receive and receipt for, compromise, compound, settle and prosecute and discontinue any suits or proceedings in respect of any or all of the amounts payable pursuant to the Development Agreement or the TIF Note; take any action that Lender 3 137887299.7 may deem necessary or desirable in order to collect the amounts payable pursuant to the Development Agreement and the TIF Note, including, without limitation, the power to perform or direct the performance by any other party to any contracts which are a part of the Development Agreement; exercise any of the remedies available to a secured party under the Uniform Commercial Code and/or to proceed to protect and enforce this Assignment by suits or proceedings or otherwise; and to enforce any other legal or equitable remedy available to Lender. The foregoing remedies are cumulative of and in addition to and are not restrictive of or in lieu of, the rights or remedies provided for or allowed in the Loan Agreement, the Mortgage Note or any other instrument given in connection with the Loan Agreement or Mortgage Note, or as provided for or allowed by law or in equity. 10. Self Help By Lender. Should a Borrower fail to perform any of its duties and obligations under the Development Agreement, then following not less than three (3) Days’ notice to the Borrower, Lender may perform the same without obligation to do so and without releasing the Borrower from its obligation to do perform such duties and obligations, and to the extent that Lender shall incur any costs or pay any monies in connection therewith, including without limitation any costs or expenses of counsel for Lender, Borrowers, jointly and severally, shall pay the same upon demand. 11. Indemnity. Lender shall have no obligation to perform or satisfy any duty or obligation of a Borrower under the Development Agreement. Each Borrower shall and does hereby, jointly and severally, indemnify, defend and hold Lender harmless from and against and in respect of any and all actions, causes of action, suits, claims, demands, judgments, proceedings and investigations (or any appeal thereof or relative thereto or other review thereof) of any kind or nature whatsoever, arising out of, by reason of, as a result of or in connection with the Development Agreement or the TIF Note, and any and all liabilities, damages, losses, costs, expenses (including fees of counsel and expenses and disbursements of counsel), amounts of judgment, assessments, fines or penalties, and amounts paid in compromise or settlement, suffered, incurred or sustained by Lender as a result of, or reason of or in connection with any of the matters above. Notwithstanding the foregoing, Borrowers shall not be required to indemnify Lender for any loss, cost or damage resulting solely from Lender’s gross negligence or willful misconduct. 12. Uniform Commercial Code. To the extent that this Assignment may be governed by the provisions of the Uniform Commercial Code now or hereafter in effect, this Assignment shall be deemed to be a security agreement within the meaning of the Uniform Commercial Code, shall be governed by the provisions thereof and shall constitute a grant to Lender of a security interest in the Development Agreement and the TIF Note. 13. Choice of Law. The parties to this Assignment have contracted for Minnesota law to govern this Assignment and it is agreed that this Assignment is made pursuant to, and shall be construed and governed by, the laws of the State of Minnesota without regard to the principles of conflicts of law. 14. Notices. Any notices and other communications permitted or required by the provisions of this Assignment (except for telephonic notices expressly permitted) shall be in writing and shall be deemed to have been properly given or served by depositing the same with the United States Postal Service, or any official successor thereto, designated as Certified Mail, Return Receipt Requested, bearing adequate postage, or deposited with a reputable private courier or overnight delivery service, and addressed as hereinafter provided. Each such notice shall be effective upon being deposited as aforesaid. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice sent. By giving to the other party hereto at least 10 days’ notice thereof, either party hereto shall have the right from time to time to change its address and shall have the right to specify as its address any other address within the United States of America. 4 137887299.7 Each notice to Lender shall be addressed as follows: Kensington Bank 101 East 3rd Street PO Box 220 Cokato, MN 55321-0220 Attention: Jon Hall with a copy to: Stinson Leonard Street LLP 3800 Eighth Street North, Suite 102 St. Cloud, MN 56303 Attention: Alex Schoephoerster Each notice to Borrower shall be addressed as follows: Bayou Alley Flats, LLC 24 North College Ave St. Joseph, MN 56374 Attention: Jon Petters 15. Successors and Assigns; Recording. This Assignment shall bind Flats and Petters and each’s successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. At the option of Lender, this Assignment may be recorded in the land records of Stearns County, Minnesota. 16. Termination. This Agreement shall terminate upon full and final repayment of all indebtedness under the Loan Agreement and Mortgage Note. This instrument was drafted by: STINSON LEONARD STREET LLP (ARS) 3800 Eighth Street N., Suite 102 St. Cloud, MN 56303 \[The remainder of this page has been left blank intentionally.\] 5 137887299.7 IN WITNESS WHEREOF, the Borrowers have executed this Assignment of Development Agreement and Tax Increment Financing Note as of the date and year first written above. BAYOU ALLEY FLATS, LLC, a Minnesota limited liability company By: Name: Jon C. Petters Its: Chief Manager STATE OF MINNESOTA ) ) ss COUNTY OF STEARNS ) The foregoing instrument was acknowledged before me this 5th day of March, 2018, by Jon C. Petters, as Chief Manager of Bayou Alley Flats, LLC, a Minnesota limited liability company, on behalf of said limited liability company. Notary Public JON PETTERS, a married individual STATE OF MINNESOTA ) ) ss COUNTY OF STEARNS ) The foregoing instrument was acknowledged before me this 5th day of March, 2018, by Jon Petters, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument. Notary Public \[Signature page to Assignment of Development Agreement and Tax Increment Financing Note\] S-1 137887299.7 ACKNOWLEDGEMENT AND CONSENT The City of St. Joseph, Minnesota (“City”) acknowledges and consents to the foregoing Assignment of Development Agreement and Tax Increment Financing Note (“Assignment”). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Assignment. In connection with the Assignment, City hereby certifies to Lender as follows: 1) City acknowledges that Lender, as issuer of the Loan Agreement and Mortgage Note, has required this consent as a condition of issuing the Loan Agreement and Mortgage Note and that Lender will rely on this consent in connection therewith. 2) The Development Agreement has not been amended or modified in any respect except as set forth in the Assignment. The Development Agreement is in full force and effect, and City has given no notice of any default thereunder. To City’s knowledge, Flats and Petters have performed all of its obligations under the Development Agreement which are required to be performed as of the date hereof and the City is not aware of any default in the performance or observance of any covenants or agreements under the Development Agreement. 3) City agrees to give to Lender a copy of any notice of an Event of Default sent to Flats, at the same time as such notice is given to Flats under the Development Agreement, addressed as follows: Each notice to Lender shall be addressed as follows: Kensington Bank 101 East 3rd Street PO Box 220 Cokato, MN 55321-0220 Attention: Jon Hall with a copy to: Stinson Leonard Street LLP 3800 Eighth Street North, Suite 102 St. Cloud, MN 56303 Attention: Alex Schoephoerster Each notice to Flats shall be addressed as follows: Bayou Alley Flats, LLC 24 North College Ave St. Joseph, MN 56374 Attention: Jon Petters Lender shall have the right to cure any default by Flats under the Development Agreement upon the same terms as are applicable to Flats; provided, however, that Lender shall have not less than thirty (30) days following receipt of notice from City to cure any such default. 137887299.7 4) City acknowledges that Lender is not responsible for the performance of any of Flats obligations under the Development Agreement and the acceptance of the Assignment by Lender does not constitute or create such an assumption of liability by Lender; provided, however this Acknowledgement and Consent of City does not release Flats from its obligations under the Development Agreement. \[The remainder of this page has been left blank intentionally.\] 2 137887299.7 Dated: ____________, 2018 CITY OF ST. JOSEPH, MINNESOTA By Rick Schultz, Mayor By Judy Weyrens, City Administrator STATE OF MINNESOTA ) ) ss. COUNTY OF STEARNS ) On this _____ day of _______________, 2018, before me personally appeared Rick Schultz, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument as the Mayor of the City of St. Joseph, Minnesota, on behalf of the City. Given under may hand and official seal this _____ day of ______________, 2018. Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF STEARNS ) On this _____ day of _______________, 2018, before me personally appeared Judy Weyrens, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument as the City Administrator of the City of St. Joseph, Minnesota, on behalf of the City. Given under may hand and official seal this _____ day of ______________, 2018. Notary Public \[Signature page to Acknowledgement and Consent to Assignment of Development Agreement and Tax Increment Financing Note (Kensington Bank)\] S-1 137887299.7 ADDENDUM A Legal Description The Land described in the referenced instrument is located in Stearns County, Minnesota, and is legally described as follows: Lot 1, Block 1, Bayou Alley Flats, Stearns County, Minnesota and That part of the northerly 64.00 feet of Lots 1, 2 and 3, Block 10, TOWNSITE OF ST JOSEPH, Stearns County, Minnesota, according to the recorded plat thereof, lying westerly of the following described Line A, and lying southerly of the following described Line B. Line A Beginning at a point on the north line of said Lot 3 distant 4.93 feet westerly of the northeast corner of said Lot 3, as measured along said north line; thence southerly 64.03 feet, more or less, to the point of intersection of a line distant 64.00 feet southerly of, as measured at a right angle to and parallel with the northerly line of said Lot 3, and the east line of said Lot 3, and there terminating, Line B Commencing at the most westerly corner of said Block 10; thence South 17 degrees 09 minutes 25 seconds East, assumed bearing along the westerly line of said Block 10 for 60.00 feet to a line distant 60.00 feet southerly of, as measured at a right angle to and parallel with the north line of said Lots 1 and 2, said point also being the point of beginning; thence North 73 degrees 20 minutes 16 seconds East, along the last described parallel line and its easterly extension for 178.05 feet to the afore described Line A and there terminating. Property Address: 24 North College Ave. Saint Joseph, MN 56374 137887299.7 ADDENDUM B COPY OF DEVELOPMENT AGREEMENT 137887299.7 ADDENDUM C FORM OF ALLONGE ENDORSEMENT ALLONGE TO: AMENDED AND RESTATED DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF ST. JOSEPH, MINNESOTA, AND BAYOU ALLEY FLATS, LLC, DATED OCTOBER 24, 2017, AS AMENDED AND ASSIGNED, IN THE ORIGINAL PRINCIPAL AMOUNT OF $642,000 PAYABLE TO THE ORDER OF BAYOU ALLEY FLATS, LLC OR REGISTERED ASSIGNS. Pay to the order of KENSINGTON BANK, a Minnesota banking association. \[Signature Page to Follow\] 137887299.7 BAYOU ALLEY FLATS, LLC, a Minnesota limited liability company By: Name: Its: Dated: ___________ STATE OF MINNESOTA ) )ss. COUNTY OF __________ ) The foregoing instrument was acknowledged before me this ____ day of _____, 20__, by _________________, the ___________ of Bayou Alley Flats, LLC a Minnesota limited liability company, on behalf of the company. __________________________________ Notary Public JON PETTERS, a married individual Dated: ___________ STATE OF MINNESOTA ) ) ss COUNTY OF ___________ ) The foregoing instrument was acknowledged before me this ____ day of _____, 20__, by Jon C. Petters, personally known to me (or provided on the basis of satisfactory evidence) to be the person who executed this instrument. Notary Public \[Signature page to Allonge Endorsement of Development Agreement and Tax Increment Financing Note (Kensington Bank)\] 137887299.7 137887299.7